This article provides more evidence that the optimistic hopes for rapid growth in world PV installations seem to finally be running up against the economic and practical constraints. China in 2014 is a good example. China's PV goal for 2014 was 14 GW. It now appears actual installations will be about 10 GW (as was predicted earlier). In 2013 the bulk of PV installations in China were large utility scale. In 2014 they wanted to move the bulk to rooftop installations. This was motivated by growing electricity transmission bottlenecks. Rooftop installations don't need new transmission but take longer and are considerably more expensive than large installations. So China was caught between a rock and a hard place. Utility systems mean building lots of expensive long distance transmission that takes years and has political opposition. Rooftop PV is more expensive and less efficient and is also relatively slow to install. Neither option could meet the 14 GW goal. The projections for next year are also for 10 GW. That would be three years in a row at about 10 GW. This just adds one more piece of evidence to the case that none of today's carbon free energy technologies are practical or economically viable alternatives to fossil fuels. This includes wind, solar, hydro, bio and nuclear. All require government support to survive and governments cannot afford to support any or all of them at the significantly higher level needed to displace fossil fuels. The advocates of each technology are happy to take government subsidies and keep tilting at windmills as long as government keeps providing the subsidies. There are attempts at advanced versions of wind, solar and nuclear, but investment levels are miniscule. We are spending over $250B on installing clean technologies that cannot succeed, but investing a tiny fraction of that on R&D for technologies that might succeed. This is especially true for system solutions like Nuclear or large Solar. In part its because government is bad at and should not be involved in picking winners. Finding a structure to finance large scale energy R&D has proved elusive. It would take venture investments at a considerably larger scale than current venture capital funds can support. For a portfolio approach to work a fund would need maybe $100B to invest in maybe 100 ventures over maybe a decade. Given the scale of energy, one success would be enough.

This report titled “Beyond Boom and Bust” , was published in April 2012 and I commented on it in this blog post. It was the work of several bodies and individuals, including the Brookings Institute. It argued that US clean energy policy was producing boom and bust cycles, but making no progress in reducing atmospheric CO2. They advocated a more results driven “technology led” policy. The recent EPIA report on PV market outlook for 2014 to 2018 had an interesting section that described the recent behavior of the PV market in Europe as a series of unsynchronized national boom and busts that were hidden by looking at the overall European market statistics. To quote from page 31:

PV seems to have always and everywhere followed a path of governments introducing subsidies, investors responding enthusiastically producing a rapid growth boom. Governments then belatedly see the costs mount and reduce subsidies, causing a market bust. Then investor confidence is broken and difficult to restore. Europe has few countries that have not gone through this cycle. Europe has gone from being the biggest PV market to number three or four, with little sign of a likely recovery. The recent US rapid PV growth is driven by US subsidies enabling profitable investment in PV. The expiration of the Investment Tax Credit in 2016 will burst this bubble, just like all the rest. The governments in Japan and China are early in the subsidy cycle so the boom phase is only building up. In a year or two the costs will be un-sustainable and the bust will inevitably follow. All of this makes it virtually impossible for PV to reduce in cost. Low and unpredictable PV market growth will not encourage investment in newer plant and equipment that can reduce costs. At current cost levels PV market cannot grow without more subsidies. As the boom and bust cycles clearly illustrate, more subsidy is unlikely to be forthcoming. As the “Beyond Boom and Bust” report argued, current US clean energy subsidy policies are not succeeding. They only considered the US, but as we can see, the problem is worldwide. Perhaps it is time to consider the “technology led” policy reforms they advocated. By Edmund Kelly

This sixty page report EPIA Global Market Outlook for Photovoltaics 2014-2018 paints a pretty accurate picture of the recent history of the global PV market and has realistic projections for the near term. It has detailed information for each geography and market segment. The graph below from the report shows the near term overall world market projection with optimistic, pessimistic and realistic scenarios. The realistic middle scenario shows slow overall market growth, but no spectacular take off. The conclusion of the report is a welcome return to reality about the future prospects for PV and a marked contrast to the over optimistic assessments that still seem to pervade the PV business. The central point of the conclusion is that “ The PV market remains in most countries a policy driven market, as shown by the significant market decreases in countries where harmful and retrospective political measures have been taken.” A policy driven market is a euphemism for a subsidy driven market. This lines up with my assessments of the prospects for PV business over the last several years as published in this blog. PV growing at this rate is fine for the PV business, but will not make PV a significant source of electricity anytime soon. It is not sufficient growth to drive costs down, so the business will need subsidy for the foreseeable future. The conclusion of the report backs this assessment as it clearly states that growth is dependent on “sustainable support schemes”. i.e. more subsidies. At some point those that promote current policies in the belief that they will reduce CO2 emissions have to stand back and make a realistic assessment of what they are accomplishing, or more accurately failing to accomplish. By putting all their eggs in the current wind and solar baskets, they are actually precluding investment in possibly better technologies. The psychology seems to be driven by a fear that admitting that current wind and solar are failing, will lead to nothing being done, and something is better than nothing. The reality is that investing only in failure guarantees failure.

There has been a series of recent articles that paint a picture of the improving state of the PV business. This article highlights that China is starting to deal with the zombie 2nd tier companies. The first tier like Jinko, Trina, Canadian, Sun Edison are pretty strong. This Jinko report shows them profitable with panel ASPs of $0.63/W in China. This matches well with $0.75/W in the US and Europe. China is lower cost because it has cheaper financing and cheaper labor. Also there is starting to be life in the Polysilicon market as polysilcon price has rebounded from $15/kg to $20/kg, with several new factories being announced by REC in China and GTAT in Malaysia. China is the key. As European demand collapsed last year, China's new subsidies for local deployment provided the foundation for their PV panel makers and confidence for future stability. However if prices stay stable at current levels, more subsidy will be needed to grow the market. Projects in the US are profitable with current subsidies and apparently there is enough investor confidence in solar to support projects with IRRs below 10%. Projects in Texas have been bid at PPAs of $0.05/kWh based on low financing costs and current subsidies. Chinese panel makers are becoming project developers as a means to ensure a market for their panels, following the example of US panel manufacturers First Solar and Sunpower that have successfully used this strategy to survive with uncompetitive panels. Overall PV growth projections seem to hinge on new markets in the developing world. Panel prices should stabilize at current levels of around $0.75/W, or even rise over the next few years as the industry returns to profitability. This is all good news, but does not paint a picture where the PV market is likely to grow to the level needed to make a significant impact on CO2 emissions any time soon.

Alternative energy exists solely because of a political will to make it so. It has been uneconomic from its modern inception in the 1970's, driven by the first oil crises. As a result, market driven economic viability has never been a central part of the alternative energy mindset. At its core it has been driven by two perceptions. The first was simply the need for a clean fossil fuel replacement largely regardless of cost. The second was that given time, costs would reduce to make them more acceptable. The political will influenced government to provide subsidies to nurture the business. These subsidies now exceed $100B/y of investment worldwide and prop up a total investment of about $250B/y. However a business that depends so heavily on government support is subject to all the problems of such reliance. Firstly government support is volatile, driven by who wins elections. Secondly, subsidized industries are notoriously inefficient. Any long term subsidy regime encourages business that live off the subsidies with little or no incentive to improve. The perception that costs would reduce has been borne out by time, but the path has been a rocky one. The recent history of PV shows the erratic nature of this progress. On a day to day basis no one sees the big picture. When PV prices were stable for a decade, the perception was of stagnation which led to betting on thin film PV. When prices were falling the perception was they would continue to fall, regardless of fundamentals. Also, market size of a heavily subsidized industry is not perceived as inextricably tied to the size of subsidy. If government continues to support the PV business, costs will decline to a point where PV is competitive for some fraction of energy for sunny locations, but to be a complete solution other technologies like long distance transmission and storage have to become economically viable as well. The current rate of improvement put that point out beyond 2050. This is the status quo. Governments willing to provide limited subsidy, a business happy to live of this subsidy with its current size and rate of growth and an alternative energy political consensus that thinks this is actually working. This status quo is not reducing CO2 emissions and will not reduce CO2 emissions out to 2050. Realists point out that change of the degree necessary to reduce CO2 takes many decades and huge political will. While alternative energy imposes large new costs, the current small political will for change is directly measured by the small amount we are collectively willing to pay for subsidies. The only way to increase the political will is to reduce the cost at a faster rate or better yet turn things around and make clean energy an economic benefit. This perception is sadly lacking. The optimists place their hope in technological breakthroughs, and so we get daily updates on basic research, most of which we know will go nowhere, but create the illusion of progress. The sad reality is that basic research takes decades to make it from the lab to the market and decades more to achieve large scale. To scale quickly a technology needs both a long gestation to viability and to be mass producible. PV has recently demonstrated that it is at this point. The rapid scalability has surprised governments that provided subsidies assuming a slower ability to scale. Germany spent over $150B in two years for about 15GW before they adjusted. China just ramped to over 12GW in one year from a standing start for a lot less. So PV technology is at a point where we can make and deploy as much as we can afford. The problem is the high cost of the resulting electricity, especially if you count the costs of intermittency and storage, is just too much money for economies to sustain. StratoSolar is only PV in a new location. It reduces the cost of resulting PV electricity to market competitive levels and increases the reliability of the supply. There is no new technology or resource that limits its ability to scale. If it is proven viable, the major thing that needs to scale is PV manufacturing, the thing that has already demonstrated scalability. This is a lot like computers in the late 1980s. A large CMOS semiconductor manufacturing business had matured and companies like Sun Microsystems that built computers based on this technology rapidly scaled to volume in the millions. This pattern repeated itself for PCs in the 10s to 100s of millions and recently for mobile phones in the billions, as the cost of computers reduced with volume over time. The common elements are ability to scale supply and an affordable product with sufficient demand to match the supply.

From an investment perspective the risk is like betting on a Sun Microsystems. They had engineering and market risk, but they were fundamentally enabled by available semiconductor technology. They were small investments in small teams that integrated existing technologies to build new products for very large new businesses. The market demand they produced could be met by the scalable semiconductor supply. Similarly, StratoSolar can create a demand that can be met by a scalable PV semiconductor supply. It’s continuing the triumph of the semiconductor age.

The holy grail of alternative energy is practical, affordable energy storage. Without this, wind and solar energy can only be a partial solution to replacing fossil fuel energy. There is a growing awareness of the significance of this problem and a wide variety of technologies are gaining increased investment. However, the problem is hard and no technology as yet seems in sight of being both practical and affordable. The goal is $100/kWh, and/or $1/W with long life and high round trip efficiency. Most technologies exceed $500/kWh and have problems with life, efficiency and/or geography. The StratoSolar main page lists some companies trying new storage approaches in the 'related sites' list on the right. StratoSolar PV electricity solved cost, reliability and geographic independence problems of Solar PV, but it still did not produce energy at night, and has been dependent on the eventual emergence of a viable energy storage technology. Over recent months we have made a very significant breakthrough in energy storage technology intimately tied to the StratoSolar solution. This new invention makes StratoSolar PV power plants complete 24/7 producers of electricity. The new StratoSolar technology is a variant of gravity energy storage. The most common electricity energy storage method is pumped hydroelectric, which is a form of gravity energy storage. This pumps a mass of water from a low reservoir to a high reservoir, storing energy as gravitational potential energy. Gravitational potential energy is mass times height times gravitational acceleration. For pumped hydroelectric storage, the height is small, measured in hundreds of meters and the mass is large. Measured in tens of thousands of tonnes. StratoSolar gravity energy storage instead makes use of the great height of platforms to store energy with relatively small masses. The height is about 20,000 meters, but the masses are measured in hundreds of tonnes. Winches raise the masses to store energy and lower them to recover energy. Each kg of mass can store about 54Wh of gravitational potential energy. Stored energy can scale with generated PV electricity. Each square meter of PV panel can generate about .9kWh/day to 1.3kWh/day, depending on latitude and gravity energy storage can easily store about 300Wh to 500Wh for each square meter. This balance of generation and storage allows a 24/7 electricity supply with the ability to respond to changing demand more quickly than expensive 'peaking generators'. This approach costs about $125/kWh today but with volume can scale to much lower cost. It also has a long life, high reliability and high round trip efficiency. So StratoSolar now provides a complete 24/7 replacement for fossil fuel electricity generation at lower cost and zero CO2 emissions.

Just a brief post that backs up previous posts on PV prices ticking up as the market stabilizes. This link is about GTM's near term PV price predictions. GTM publishes market research on the PV business. They are usually bullish and over optimistic.

This is good news for the PV business, as it means that it is finally getting to a more healthy footing after several years of disarray. This is mostly because China decided to support it's PV investments by subsidizing local demand within China. It will be interesting to see how far this goes, and also it will be interesting to see how long the recent surge in Japan lasts, now that they are adopting far more limited and realistically achievable CO2 emissions reduction goals.

The deeper reality is that PV panels at these prices produce electricity that is still too expensive without subsidy in almost all markets. What is called grid parity for rooftop solar is now achievable in a few markets, but this is only because retail electricity is an overpriced monopoly in those markets.

Solar with current subsidy levels is a stable business, but its not likely to grow to a size that will have an impact on CO2 emissions reduction. Hopefully the failure of over optimistic projections of PV price reductions based on short term extrapolations will sober up the eternal optimists and get some sense back into discussions of viable and realistic ways to reduce CO2 emissions. I doubt it.

It's a while since I discussed the topic of subsidies. It's a difficult topic to understand, and usually provokes defensive reactions from solar energy supporters. This recent interview with Shyam Mehta, a GTM PV researcher provides good current information and perspective on the PV business.

As can be seen from the chart, there were dramatic changes in the composition of PV demand from 2012 to 2013 but no overall growth in volume or revenue. Basically the PV demand went to markets where there were new or growing subsidies and left markets where subsidies declined. Overall, China probably adjusted its subsidies upward mostly to ensure their PV industry survived the drop in European demand driven by the drop in European subsidies. This is not a well behaved or predictable market. The predictions are totally dependant on predicting subsidies. The GTM forecast is predicting that Europe will regain an appetite for increased subsidies in 2015 and beyond. Its hard to know what the basis for this is. The predicted growth in the US is based on the subsidies that are in place remaining until they diminish in 2016, when US demand is predicted to drop about 50%. The biggest unknown is Asia. Japan's commitment to expanding PV seems pretty solid at least for a few years. China's demand is hard to predict. If it mostly depends on propping up the local PV business they don't have much need to increase demand substantially going forward. Overall it seems a bit optimistic to be predicting an average 20% PV market growth over each of the next two years. Long term, subsidies would be required to grow substantially to maintain a 20% growth rate, which could see prices halve by about 2025, and the cost of subsidies leveling off. A rough estimate of the PV market in 2013 is 30GW, worth about $90B of which $50B is subsidies. If PV prices have stabilized, growth of 20%/y implies growth in subsidies to around $100B in 2017. For the US the 2013 PV numbers are about 4GW installed, worth about $12B, of which about $7B is subsidies. The projected growth implies about $14B in PV subsidies by 2016. That's about the entire alternative energy subsidies in 2013, so it will be noticed. What is the appetite for subsidies? The US spent about $150B from 2008 to 2013, or $30B/y. A lot of that was ARRA one time expenditures. 2014 subsidies are projected to total about $12B. Solar is taking more of the pie. The current US congress would not be predicted to increase alternative energy subsidies, and could easily cut them. This is all rather long winded, but the bottom line is the PV market size is completely defined by subsidies and projecting PV growth means realistically projecting increased subsidies. Given the pain level associated with todayâs subsidy levels, (witness Germanys's pullback) its difficult to see significant increases in world total subsidies to the level necessary to sustain substantial PV growth.